Unfair Dismissal in Malaysia: Your Comprehensive Guide to Rights, Procedure, and Remedies

Unfair dismissal is one of the most common employment disputes in Malaysia. It occurs when an employer terminates an employee without a "just cause or valid reason" or in a manner that is deemed harsh, unjust, or unreasonable.The Legal Framework

The primary law protecting employees against unjust dismissal is the Industrial Relations Act 1967 (IRA 1967). Section 20 of the IRA 1967 grants all employees, including foreign employees, the statutory right to challenge a termination made without just cause or excuse. The Employment Act 1955 also remains a key employment law in force.

Under Malaysian law, all terminations initiated by the employer are subject to the "just cause or excuse" test. Importantly, courts have consistently held that termination based solely on providing contractual notice (as per Section 12(1) of the Employment Act 1955) does not, by itself, constitute 'just cause or excuse'.What Constitutes Unfair Dismissal?

A dismissal is considered unfair if it lacks substantive justification or procedural fairness. Examples include:

• Lack of Justification: Termination without a valid reason.

• Procedural Flaws: Firing an employee without following due disciplinary procedures (such as issuing warnings, a show cause letter, or conducting a domestic inquiry).

• Constructive Dismissal: This occurs when an employer creates intolerable working conditions that force an employee to resign; in law, this resignation is treated as a dismissal.

• Discrimination: Dismissal based on protected characteristics like age, gender, race, religious belief, disability, or participation in union activities.

• Pretextual Reasons: Using a minor technical ground to disguise the real motive, such as victimisation or retrenchment avoidance.

The Burden of Proof and Valid Grounds for Dismissal

When an unfair dismissal claim is challenged, the employer bears the burden of proving, on a balance of probabilities, that the dismissal was for 'just cause and excuse'.

Valid reasons for dismissal generally include:

• Misconduct: Gross acts such as theft, fraud, leaking confidential information, willful disobedience to lawful orders, or insubordination. For this, the employer must conduct a "due inquiry" (or "domestic inquiry") to allow the employee to respond to allegations and defend themselves.

• Retrenchment/Redundancy: This happens when the business no longer requires the current job or labour. The employer must prove a genuine business necessity and should follow fair procedures, such as the "Last In, First Out" (LIFO) principle in selecting employees.

• Poor Performance: The employer must first provide the employee with sufficient notice or warning, regular feedback, a performance management plan (PIP), and a reasonable opportunity to improve before termination is considered.

How to File an Unfair Dismissal Claim

An employee who believes they have been dismissed without just cause or excuse must follow a strict statutory procedure:

1. Gather Evidence (Step 1): Collect supporting documents such as the termination letter, employment contract, and any relevant communication (e.g., emails about disputes or disciplinary action).

2. File a Representation (Step 2): A written representation seeking reinstatement must be filed with the Director General of Industrial Relations (DGIR) at the nearest Industrial Relations Department. This must be done within 60 days of the dismissal. This deadline is strictly enforced.

3. Conciliation: The DGIR will arrange a conciliation meeting between the employee and employer to try and reach an amicable settlement. Legal representation is generally not permitted at this stage.

4. Referral to Industrial Court: If conciliation fails, the dispute is automatically referred to the Industrial Court for adjudication. Legal representation is permitted during the Industrial Court hearing.

5. Appeal: If either party is dissatisfied with the Industrial Court's decision (Award), they can file an appeal to the High Court within 14 days.

Remedies and Awards

If the Industrial Court rules in favour of the employee, the available remedies include:

• Reinstatement: The primary remedy is the restoration of the employee to their former position on the same terms.

• Compensation in lieu of reinstatement: This is typically calculated at one month's wages for every completed year of service. This is often awarded when reinstatement is not appropriate or practicable due to a breakdown of the working relationship.

• Back Wages: Payment of full wages from the date of dismissal to the date of the Award. This is capped at a maximum of 24 months' wages for confirmed employees and 12 months' wages for probationers.